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assets and remain on the balance sheet at amortised cost or fair value depending on their classification.
Reverse repurchase agreements Reverse repos are treated as collateralised lending. The amount lent is
reflected as a financial asset as “Cash and balances with central banks”, “Due from banks” or “Loans and
advances to customers”. Amounts paid and received in excess of the amounts
borrowed and lent on the repos and reverse repos are amortised as interest expense and interest income
respectively using the effective interest method. 2.12 Goodwill
Goodwill arising from business combinations generally represents the excess of the acquisition cost over the
fair value of identifiable assets acquired and liabilities and contingent liabilities assumed on the acquisition
date. Goodwill is stated at cost less impairment losses and is tested at least annually for impairment.
At the acquisition date, any goodwill acquired is allocated to each of the cash-generating units CGU or
group of CGUs expected to benefit from the
combination’s synergies. An impairment loss is recognised when the carrying
amount of a CGU, or group of CGUs, including the goodwill, exceeds the applicable recoverable amount.
The recoverable amount of a CGU or CGU group is the
higher of the CGU’s or CGU group’s fair value less cost to sell and its value-in-use. An impairment loss on
goodwill is recognised in the income statement and cannot be reversed in subsequent periods.
2.13 Properties and other fixed assets Properties including investment properties and other
fixed assets are stated at cost less accumulated depreciation and impairment losses.
Depreciation is calculated using the straight-line method over the estimated useful lives of the assets.
Generally, the useful lives are as follows: Buildings
50 years or over the remaining lease period, whichever is
shorter.
Leasehold land 100 years or over the remaining
lease period, whichever is shorter. Leasehold land where
the unexpired lease period is more than 100 years is not
depreciated.
Computer software 3 - 5 years
Office equipment, furniture and fittings
5 - 10 years Please refer to Note 25 for the details of properties and
other fixed assets and their movements during the year.
2.14 Financial liabilities Initial recognition, classification and subsequent
measurement Financial liabilities are initially recognised at fair value.
The Group generally classifies and measures its financial liabilities in accordance with the purpose for
which the financial liabilities are incurred and managed. Accordingly:
Financial liabilities are classified as financial liabilities at fair value through profit or loss if
they are incurred for the purpose of repurchasing in the near term
“held for trading”, and this may
include debt securities issued and short positions in securities for the purpose of ongoing market-
making or trading. Financial liabilities at fair value through profit or loss can also be designated by
management on initial recognition
“designated at fair value through profit or loss
”. Financial
liabilities in this classification are usually within the “Treasury” segment.
In addition, some financial liabilities used to fund specific financial assets measured at fair value
through profit or loss are designated under the fair value option when doing so eliminates or
significantly reduces measurement or recognition inconsistencies that would otherwise arise.
Realised or unrealised gains or losses on financial liabilities held for trading and financial liabilities
designated under the fair value option, except interest expense, are taken to “Net trading income”
in the income statement in the period they arise. Interest expense on structured investment deposits
at fair value through profit or loss are also presented together with other fair value changes in
“Net trading income.”
Derivative liabilities are treated consistently with derivative assets. Please refer to Note 2.8 for the
accounting policy on derivatives.
Other financial liabilities are carried at amortised cost using the effective interest method. These
comprise predominantly the Group’s “Deposits and
balances from customers ”, “Due to banks” and
“Other debt securities”. Please refer to Note 13 for further details on the types
of financial liabilities classified and measured as above. Determination of fair value
The fair value of financial liabilities is the price that would be paid to transfer the liability in an orderly
transaction between market participants at the measurement date.
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Please refer also to Note 39 for further fair value disclosures.
Derecognition A financial liability is derecognised from the balance
sheet when the obligation specified in the contract is discharged, cancelled or expired.
2.15 Loan commitments, Letters of credit and